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Taxes and Spending Chapter 16 Section 3 and 4 Federal Budget Government’s use of the taxes it collects. Deficit Spending – Spending more than is earned each year. Budget Surplus – Spending less than is earned each year. National Debt National Debt – Debt owed by the federal government (Also called Public Debt) US Debt Clock Taxes Based on either ability to pay or in proportion to the amount used. Progressive Proportional Regressive Proposed 2012 Budget http://www.whitehouse.gov/omb/budget Chapter 17 Section 1 Unemployment and Inflation Why does the Government collect statistics on the unemployed? When workers are unemployed, they, their families, and the country as a whole lose. Workers and their families lose wages, and the country loses the goods or services that could have been produced. In addition, the purchasing power of these workers is lost, which can lead to unemployment for yet other workers. To know about unemployment—the extent and nature of the problem— requires information. How many people are unemployed? How did they become unemployed? How long have they been unemployed? Are their numbers growing or declining? Are they men or women? Are they young or old? Are they white or black or of Hispanic ethnicity? Are they skilled or unskilled? Are they the sole support of their families, or do other family members have jobs? Are they more concentrated in one area of the country than another? After these statistics are obtained, they have to be interpreted properly so they can be used—together with other economic data—by policymakers in making decisions as to whether measures should be taken to influence the future course of the economy or to aid those affected by joblessness. Measuring Unemployment Stabilization Policies – Attempts by the federal government to keep the economy healthy; includes monetary AND fiscal policies. Unemployment Rate % of the civilian labor force that is unemployed but actively looking for work. Michigan - September 2011 (11.1%) United States – September 2011 (9.1%) Rise in unemployment is always a concern of the nation’s economic health Full Employment When the majority of workers are employed (Under 5% unemployment) 4 Types of Unemployment Cyclical Unemployment – Unemployment associated with the ups or downs in the business cycle. Unemployment rises during recessions down during recoveries. Cont. Structural Unemployment – Unemployment caused by changes in the economy Example – Michigan Cont. Seasonal Unemployment – Unemployment caused by changes in seasons. Ex. Road Construction Workers Cont. Frictional Unemployment – Temporary unemployment between jobs because of firings, layoffs, voluntary searches for new jobs, or retraining. Inflation Inflation almost always occurs, and as long as it happens at normal reasonable pace there should not be any problems. If inflation occurs too rapidly then people’s real income (income adjusted for inflation) goes down. Retired people are the most negatively affected by inflation. 2 Types of Inflation Demand-Pull Inflation – Theory that prices rise as a result of excessive demand (by consumers and/or businesses); demand increases faster than total supply, resulting in shortages which lead to higher prices. Cont. Cost-Push Inflation – Inflation caused by a rise in operating costs for businesses. Ex. Higher Wages or Increased Cost of Oil Stagflation Combination of inflation and high unemployment/stagnant economy at the same time